Long-Overdue Report Cards Get Sent Home - TheStreet

Heading into the final hour of trading, major averages took a noticeable turn for the worst. (More on that later today.) But they were holding fairly steady earlier in the session, so I figured it was a good time to review how picks made by this column's sources during the first quarter have panned out.

So you can imagine my chagrin upon the realization that I never did our regular "report card" for the fourth quarter of last year. I attribute this gross oversight to "baby-itis" -- a medical condition in which the sufferer loses certain brain functions due to lack of sleep and the realization he (or she) is wholly responsible for another being's life and well-being. (Ask any parent about this affliction.)

Acknowledging that what amounts to an incredibly long period of time in this market has elapsed since the fourth quarter, we've added a second "performance" time frame to the table below. Today we look at picks made here in October (when I was frequently away following my daughter's birth). We'll review November and December in the coming days, and the first quarter soon thereafter, if market activity allows.

Note that the performance columns assume an investor held the stocks from the time the call was made through the dates cited below, which isn't necessarily what the sources recommended. As always, we try to provide updates on the sources' current thinking. To wit:

James Rohrbach recently removed the buy call from the

Nasdaq

, as reported

last week. He maintains a buy recommendation on the

NYSE

.

Philip Erlanger, former senior technical analyst at Fidelity Management and currently editor of

Erlanger Squeeze Play

, said today that he would "cut loose" the picks cited here in mid-October at the following levels:

IBM

(IBM) - Get Report

at $120;

Micron

(MU) - Get Report

at $22.60 ("a little too early");

Raytheon

(RTN) - Get Report

at $29.90; and

US Cellular

(USM) - Get Report

at $41.35.

Currently, Erlanger maintains a bullish stance on gold and related shares, which he first took in the third quarter of last year, for the first time in his career. While declaring he was "no gold bug," Erlanger named

Agnico Eagle Mines

(AEM) - Get Report

as his favorite name in the group.

As to the notion gold shares have gotten ahead of themselves, "that's what people thought in January and February," the technician recalled. "They're still very strong, and people haven't gotten that enthusiastic," judging by the still-high level of short interest. Given the fact the dollar hasn't been doing well -- it was rebounding midday Monday, most notably vs. the yen -- and the

Federal Reserve

is likely to keep rates steady for some time, adding to potential inflationary pressures, "I don't see a lot of downside" for gold, he said.

Conversely, Erlanger does foresee continued downside for the major averages and believes "the pain taking place in larger-caps is going to spread to other areas."

Too much bullish sentiment is the key to Erlanger's currently dour view of the market. In addition to the relatively quietude of the

VIX, he noted that short interest as a ratio of total volume remains relatively low. The short-interest ratio of

S&P 500

stocks was recently 3.12, up from its low of 2.45 in January 2001 but down from its long-term range between 5 and 9.

The recent increase in short interest "is the beginning of where we need

sentiment to get, but attention is only starting to swing toward more bearishness," he said. "There's a lot of swing left before you have a major buying point."

In terms of specific names, Erlanger maintains a short position in

Cisco

(CSCO) - Get Report

, which was up 1% at midday, ahead of its quarterly profit report tomorrow. Erlanger "hasn't decided" if he's going to cover of that much-anticipated event.

Hunter Gathers Optimism, Schaeffer's Sees More Drought

Dave Hunter, chief market strategist at Kelly & Christensen, maintained a bearish stance throughout the fourth-quarter and into the

beginning of 2002. Recently, however, he's started seeing prospects for a rally, as reported here on

April 3.

Despite recent weakness, "I absolutely am still looking for a sharp rally, probably lasting two or three months with the same objectives as before" -- Dow 11,000 and Nasdaq 2200-2400, Hunter commented via email.

Last week, particularly Friday, "was ugly, but I didn't see any breakdowns that caused me to question my near-term bottom thesis."

Unlike Erlanger, Hunter believes investors are exhibiting "a high level of caution if not outright fear."

"I realize that many technicians believe we need much more oversold conditions to get a bottom but that's because they are looking for conditions similar to those found at major bottoms such as last September, Oct. 1991, August 1982, etc," he wrote. "I am not looking for a major bottom here, although in the techs the pessimism may be getting close to that found at major bottoms."

Still, Hunter remains bearish long-term and believes a retest of the September lows will follow any near-term trading rally.

Finally, the folks at Schaeffer's Investment Research remain bearish on the market's long-term prospects, as noted in the table.

"As we have reiterated time and time again, we feel that this shaky bear market will fail to reach a solid bottom until there is honest, unadulterated fear in the Street," Bernie Schaeffer recently wrote at the firm's Web site.

This morning, the firm noted the 21-day moving average of the CBOE equity put/call volume ratio has been rising sharply from its recent low of 0.60 in March, hitting readings above 0.80 on Thursday and Friday.

Higher put/call ratios are considered bullish by most observers -- because they indicate more put buying and thus caution or fear among traders. But they still aren't high enough for Schaeffer's, and "the elevated readings needed to push this indicator higher would likely only be generated by a market selloff of grave proportions," the firm contended. "Even if the

ratio were to peak shortly, it still has to contend with the fact that rising periods have been more bearish than falling periods have been bullish."

That's because recent bottoms for the put/call ratio have occurred at "increasingly higher levels ... coinciding with lower and lower market tops," Schaeffer's concluded.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.